THERE is good news for credit card users today following a clampdown on rip-off penalty charges.

The banks behind some of the UK's most popular cards are slashing the penalties for customers who pay bills late or go over their credit limit.

HSBC, Lloyds TSB and Nationwide are among those reducing their "default charges" from #20 to #12 from today.

But they are only cutting the fees - which make them more than #300million a year -because the Office of Fair Trading has put a gun to their heads.

After a lengthy investigation, the OFT ruled that penalty charges - which average #25 - were excessive and ordered the lenders to cut them. Some firms have acted quickly although others are dragging their feet, delaying the cuts until August.

While the OFT should be applauded for its efforts, Your Money wants the credit card companies to go further. We believe they should all follow the example set by internet bank Egg.

It obliges its three million customers to set up a direct debit to repay some or all their credit card bill each month. The OFT applauded this policy which makes it less likely that customers will get stung for missing a payment deadline. Egg spokesman Mark Maguire said: "It's not rocket science. It has always been a condition of having an Egg card and we think it is a win-win.

"It stops people missing payments because they've been away or simply forgotten and let's face it, it's easy for these things to slip your mind. Paying your credit card bill is hardly the first thing most people want to think about.

"From our point of view, if a direct debit isn't paid it can be an early warning sign that people are in financial difficulty. We can contact them and prevent them getting into deeper trouble.

"You have to question the motives of companies that don't insist on this. Do these charges exist simply to recover the lender's cost if people pay late or are they an easy way of making money?"

Mike Naylor, of Which? magazine, said: "The only way to be certain you never miss a payment is to set up a direct debit. Banks should always give customers the option of setting one up but they don't."

He also urged banks to make it simpler for people to pay and speed up the time it takes for cheques to clear. A Lloyds spokeswoman said the bank, which has around six million credit card accounts, had no plans to follow Egg's lead. She added: "We believe in giving customers a choice about how and when they pay. For those who choose direct debit we make it simple, but advances in internet and 24-hour phone banking mean late payments are easily avoidable."

HSBC spokesman Tim Pie also ruled out the idea of making standing orders mandatory. He said: "Our customers would rather have some choice about the way they pay."

WE SAY:

THE banks claim these charges are purely to recover their costs so they should be doing everything in their power to reduce the odds of people paying late. The fact they are not prepared to follow Egg's example and introduce a simple safety net only serves to fuel suspicions that they see these penalty charges as an easy way to boost profits.